firms 2017 Industry benchmark data supplement to How America Saves
Introduction To help defined contribution (DC) plan sponsors understand how their industry s plans compare with -recordkept, we are pleased to offer this industry benchmark report. It is based on 2016 recordkeeping data and compiled from our comprehensive data systems systems that are the backbone of the research and analysis that have made a valued resource within the retirement plan industry. We believe this information can help you make more effective plan decisions and will serve as a valuable reference tool as you continue to develop your retirement programs. The report s data is for technology firms with -recordkept qualified. These firms, as defined by the Bureau of Labor Statistics, are from a broad range of industries, but are defined as technology firms if they have at least five times the level of technological employment (science, engineering, and technician) as the national average for all industries. Throughout this document, we divide the data for technology firms into two groups based on the number of in the plans. This breakout should make the data more relevant for plan sponsors. Data is labeled as <1,000 for plans with fewer than 1,000 and 1,000+ for plans with more than 1,000. Contents Benchmark population... Figure 1 Accumulating plan assets Participation rates...figure 2 Deferral rates...figure 3 Aggregate participant and employer contribution rates... Figure 4 Automatic enrollment design...figure 5 Catch-up contributions... Figure 6 Roth contributions...figure 7 After-tax contributions...figure 8 Account balances...figure 9 Managing participant accounts Asset and contribution allocations...figure 10 Number of investment options offered...figure 11 Number of investment options used...figure 12 Types of investment options offered and used... Figure 13 Participants with professionally managed allocations... Figure 14 Participants with professionally managed allocations, new plan entrants during the year...figure 15 Plan use of target-date funds...figure 16 Participant use of target-date funds...figure 17 Distribution of equity exposure...figure 18 Advice offered...figure 19 Accessing plan assets Participant loans... Figure 20 Participant in-service withdrawals...figure 21
Figure 1. The benchmark population includes all in full-service qualified DC plans sponsored by firms engaged with at least five times the level of technological employment as the national average for all industries. Most figures in this booklet compare data for this population with that of all qualified. Figures 2, 3, and 4 are estimated for 2016 1. Accumulating plan assets Figure 2. The participation rate is the broadest metric for gauging 401(k) performance. Plan-weighted participation is calculated by taking the average of participation rates among all plans. Participantweighted participation considers all employees in all plans as if they were in a single plan. Figure 1. Benchmark population, 2016 defined contribution plans <1,000 1,000+ Number of plans 117 68 1.9 thousand Number of 36,954 576,442 4.4 million Average number of 316 8,477 2,250 Median number of 230 2,973 397 Amount of plan assets $4 billion $59 billion $420 billion Average plan assets $38 million $870 million $216 million Median plan assets $26 million $274 million $41 million Source:, 2017. Figure 2. Participation rates, 2016 estimated defined contribution plans 9 85% 86% 81% 81% 79% 66% <1,000 1,000+ Plan-weighted Participant-weighted Source:, 2017. 1 Please see Methodology section on page 13. firms > 1
Figure 3. The level of participant deferrals is a critical determinant of whether a plan will generate an adequate level of savings. Deferral rates exclude eligible employees not contributing to their plan. The median rate means half of were saving above this rate and half were saving below it. Figure 4. Taking into account both employee and employer contributions, the average total participant contribution rate in 2016 was 10.9% and the median was 10.. estimates that a typical participant should target a total contribution rate of 9% to 12% to 15% or more, including both employee and employer contributions. For with lower wages, Social Security is expected to replace a higher percentage of income, and so a lower retirement savings rate may be appropriate. For higher-wage, Social Security replaces a lower percentage of income, and savings rates may need to be higher. In fact, higher-wage may not be able to achieve sufficient savings rates within the plan because of statutory contribution limits. Figure 5. Automatic enrollment or autopilot plan designs reframe the savings decision. Instead of making a positive election to join the plan, employees are automatically enrolled and must take action to opt out. Automatic enrollment or autopilot designs are an important plan design feature that can increase plan participation and plan deferral rates. With an autopilot design, individuals are automatically enrolled into the plan, their deferral rates are automatically increased each year, and their contributions are automatically invested in a qualified default investment alternative (QDIA). Figure 3. Deferral rates, 2016 estimated Figure 4. Aggregate participant and employer contribution rates, 2016 estimated defined contribution plans <1,000 1,000+ defined contribution plans permitting employee-elective deferrals 15% Deferral rates Average 7.7% 7.7% 6.2% Median 6.7 6.8 5.0 11.4% 10.5% 11.1% 10.9% 10.2% 10. Distribution of rates 0.1% 3.9% 22% 23% 36% 4. 6. 20 20 23 6.1% 9.9% 33 32 23 10. 14.9% 17 18 13 15.+ 8 7 5 Source:, 2017. <1,000 1,000+ Average Median Source:, 2017. 2 > firms
Figure 6. Nearly all plans offer catch-up contributions. Figure 6. Catch-up contributions, 2016 Figure 7. The Roth feature is offered by 65% of plans. Figure 8. After-tax employee-elective deferrals are available to in about one-fifth of plans. The after-tax feature is more likely to be offered by large plans. Figure 5. Automatic enrollment design, 2016 defined contribution plans with automatic enrollment <1,000 Automatic enrollment adoption 1,000+ plans 42% 66% 45% Default automatic enrollment rate 1 percent 2% 5% 1% 2 percent 4 5 7 3 percent 31 47 44 4 percent 25 17 15 5 percent 13 9 13 6 percent or more 25 17 20 Default automatic increase rate 1 percent 73% 6 65% 2 percent 2 2 2 Voluntary election 18 33 24 Not offered 7 5 9 Default fund Target-date fund 96% 10 97% Other balanced fund 0 0 2 Subtotal 96% 10 99% Money market or stable value fund 4% 1% Source:, 2017. defined contribution plans permitting catch-up contributions <1,000 1,000+ plans offering 98% 10 98% offered 99 100 99 using 26 24 12 Source:, 2017. Figure 7. defined contribution plans permitting Roth contributions <1,000 1,000+ plans offering 72% 88% 65% offered 83 95 68 using 14 14 13 Source:, 2017. Figure 8. defined contribution plans permitting after-tax contributions <1,000 1,000+ plans offering 12% 23% 18% offered 20 29 33 using 10 6 8 Source:, 2017. Roth contributions, 2016 After-tax contributions, 2016 firms > 3
Figure 9. Account balances are a widely cited measure of the overall effectiveness of. However, current balances may not reflect lifetime savings and are only a partial measure of retirement preparedness for many. The median balance represents the typical participant: Half of all have balances above the median and half have balances below. Figure 9. Account balances, 2016 defined contribution plans $140,000 $121,517 $102,670 $96,495 Managing participant accounts Figure 10. Participant investment decisions are a critical determinant of long-term growth of retirement savings. With the growing use of automatic enrollment in, an increasing number of are not making active investment choices but are defaulted into a sponsor-designated investment portfolio. Plan asset allocation shows the asset allocations as of December 31, 2016. Participant contribution allocation shows where 2016 contributions were allocated. The percentage of equities includes company stock, diversified equity funds, and the equity portion of balanced funds. $0 $39,304 <1,000 Average Median Source:, 2017. $31,522 1,000+ $24,713 Figure 10. Asset and contribution allocations, 2016 defined contribution plans Plan asset allocation Participant contribution allocation 10 7 equities* 9% 8% 8% 73% equities 8% 7% 5% 71% equities 11% 7% 6% 72% equities 7% 7% 7% 77% equities 5% 5% 74% equities 7% 6% 5% 29% 33% 28% 42% 56% 49% 46% 4 41% 37% 28% 3 <1,000 6% 1,000+ 6% <1,000 1,000+ Brokerage Company stock Diversified equity funds Target-date funds Other balanced funds Bond funds Cash Source:, 2017.portion of balanceortion of balanced funds. 4 > firms
Figure 11. Participant investment decisions in DC plans occur within the context of a set or a menu of choices offered by the employer. In this figure, we count a series of target-risk or target-date funds as one fund since these funds are designed as a single-fund investment. Figure 11. Number of investment options offered, 2016 defined contribution plans 5 plans offering 3% 1% 31% 38% 38% 34% 33% 29% 13%13% 12% 1 9% 7% 1 5 6 10 11 15 16 20 21 25 26 30 31+ Number of options 3% 9% 5% 6% 6% <1,000 1,000+ Average funds offered 17.7 16.8 17.9 Median funds offered 17 16 16 <1,000 1,000+ Source:, 2017. firms > 5
Figure 12. Despite the large number of funds available to them, half of use only one fund. In this figure, we count each target-risk or target-date fund used as a separate fund, rather than considering them as one fund, as in Figure 11. This is because can, and some do, invest in multiple target-date or target-risk funds. Figure 13. Virtually all plans offer an array of investment options covering four major investment categories: equities, bonds, balanced funds, and cash reserves. Equity offerings typically include both indexed and actively managed U.S. stock funds as well as one or more international funds. Within each population, the first column shows the percentage of plans offering at least one investment in that category. The second column shows the percentage of using that type of option among offered that option. Figure 12. Number of investment options used, 2016 defined contribution plans using 6 5 46% 55% 17% 1 11% 9% 8% 7% 8% 7%6% 7% 7% 7% 5% 5% 5% 4% 4% 5% 3% 2% 2%2% 4% 4% 1 2 3 4 5 6 7 8 9+ Number of funds <1,000 1,000+ <1,000 1,000+ Average funds used 3.0 2.9 2.7 Median funds used 2 2 1 Source:, 2017. 6 > firms
Figure 13. Types of investment options offered and used, 2016 defined contribution plans <1,000 1,000+ Percentage of plans offering offered using plans offering offered using plans offering offered using Cash 99% 22% 10 18% 99% 19% Money market 67 15 56 11 67 12 Stable value/investment contract 61 20 78 14 63 17 Bond funds 98% 24% 10 21% 98% 2 Active 76 14 74 10 72 10 Index 85 19 93 17 89 16 Inflation-protected securities 32 5 41 2 33 4 High-yield 22 12 19 4 19 5 International 20 2 21 2 19 2 Balanced funds 98% 76% 99% 82% 99% 81% Traditional balanced 71 23 53 18 70 20 Target-risk 14 22 3 8 17 5 Target-date 91 65 99 78 92 74 Equity funds 98% 47% 10 38% 99% 36% Domestic equity funds 98% 46% 99% 37% 99% 35% Active domestic 93 33 94 26 94 23 Index domestic 98 36 99 29 99 28 Large-cap value 91 18 91 12 90 13 Large-cap growth 89 23 90 17 90 17 Large-cap blend 97 29 99 25 97 24 Mid-cap 88 23 88 24 89 17 Small-cap 89 20 85 15 88 13 Socially responsible 9 8 9 5 8 3 International equity funds 96% 24% 10 22% 97% 21% Active international 86 19 88 15 85 15 Index international 65 12 74 14 66 13 Emerging markets 30 10 29 8 32 7 Sector funds 39% 13% 37% 11% 35% 1 REIT 33 10 31 9 31 7 Health care 10 23 4 8 11 8 Energy 8 13 4 6 7 6 Precious metals 3 5 3 4 4 2 2 6 6 16 2 8 Utilities 1 1 3 5 1 4 Natural resources 0 0 3 3 1 3 Financials 0 0 0 0 1 3 Communications 0 0 0 0 <0.5 6 Commodities 0 0 0 0 <0.5 5 Consumer 0 0 0 0 <0.5 2 Company stock 1% 9% 16% 54% 9% 48% Self-directed brokerage 9% 2% 31% 1% 17% 1% Managed account program 19% 4% 65% 5% 27% 7% Source:, 2017. firms > 7
Figure 14. An important development in is the rising prominence of professionally managed allocations. Participants with professionally managed allocations are those who have their entire account balance invested in a single target-date or balanced fund or a managed account advisory service. These professionally managed investment options signal a shift in responsibility for investment decision-making away from the participant and toward employerselected investment and advice programs. By 2021, we expect that nearly three-quarters of all will be using a professionally managed allocation. Figure 15. Among new plan entrants ( entering the plan for the first time in 2016), the professionally managed allocation trend is even more pronounced. Figure 16. Target-date strategies continue to grow in importance in DC plan investment menus. The funds replace the complex task of portfolio construction with a simplified choice the choice of an expected date of retirement and provide automatic age-based rebalancing over time. They are likely to appeal to less sophisticated or less engaged investors looking for a streamlined portfolio choice, as well as to sponsors seeking a default investment for automatic enrollment. Figure 17. Participants invest in target-date funds in one of two ways. Pure investors hold a single target-date fund and no other investments. Mixed investors hold a target-date fund in combination with other investments, including other target-date funds. Figure 14. Participants with professionally managed allocations, 2016 Figure 15. Participants with professionally managed allocations, new plan entrants during the year, 2016 defined contribution plans 10 defined contribution plans 10 85% 75% 74% 42% 45% 53% 81% 74% 4 73% 4 4 46% <1,000 1,000+ <1,000 1,000+ Single target-date fund Single balanced fund Managed account program Source:, 2017. Single target-date fund Single balanced fund Managed account program Source:, 2017. Note: Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target-date funds is not guaranteed at any time, including on or after the target date. 8 > firms
Figure 16. Plan use of target-date funds, 2016 defined contribution plans <1,000 1,000+ all plans offering target-date funds 91% 99% 92% all recordkeeping assets in target-date funds 29% 33% 28% all contributions directed to target-date funds 42% 56% 49% all invested in target-date funds 61% 77% 72% Among plans offering target-date funds plan assets invested in target-date funds 3 33% 29% plan contributions directed to target-date funds 44% 56% 5 Source:, 2017. Figure 17. Participant use of target-date funds, 2016 defined contribution using target-date funds <1,000 1,000+ all offered target-date funds 95% 10 97% using target-date funds when offered 65% 78% 74% participant account balances in target-date funds 6 54% 53% total participant and employer contributions in target-date funds 79% 79% 78% Distribution of percentage of participant assets in target-date funds 1% 24% 13% 15% 13% 25% 49% 9 11 8 5 74% 5 12 6 75% 99% 5 9 7 10 68 53 66 Distribution of percentage of total participant and employer contributions in target-date funds 1% 24% 8% 8% 8% 25% 49% 8 8 7 5 74% 4 8 4 75% 99% 2 13 5 10 78 63 76 owning One target-date fund only 65% 52% 65% One target-date fund plus other funds 28 39 28 Two or more target-date funds only 2 2 2 Two or more target-date funds plus other funds 5 7 5 Source:, 2017. firms > 9
Figure 18. From an investment perspective, an average asset allocation to equities of approximately two-thirds or more may be appropriate in light of the long-term retirement objectives of most DC plan. However, the allocation to equities varies dramatically among. Extreme allocations of or 10 may be problematic, depending on individual circumstances. Figure 18. Distribution of equity exposure, 2016 defined contribution 4 38%38% 7% 4% 4% 3% 3% 4% 4% 2% 2% 1% 4% 3% 3% 8% 6% 5% 11% 1 1 1% 3 31% 4 41% 5 51% 6 61% 7 71% 8 81% 9 91% 99% 10 Percentage in equities 18% 16% 16% 3 8% 15% 9% 8% 6% 6% <1,000 1,000+ Average percentage equities 71% 77% 74% Median percentage equities 80 87 85 <1,000 1,000+ Source:, 2017. 10 > firms
Figure 19. Many in may lack the financial planning skills, time, or interest to make appropriate investment decisions. To address need for assistance with investment decisions, plan sponsors using as recordkeeper offer a range of advice programs, including Personal Online Advisor, an online advice service; Managed Account Program, a managed account advisory service; and Financial Planning Services. The online advice service and managed account program are provided by Financial Engines, a third-party advisor. The financial planning services are provided by Advisers, Inc. Each of these programs allows to include information about assets they have outside of the plan, which may affect the selection of in-plan investments. Figure 19. Advice offered, 2016 defined contribution plans 9 plans offering 29% 78% 39% 19% 65% 27% 75% 67% 62% Online advice Managed account advice Financial planning services age 55+ <1,000 1,000+ Source:, 2017. firms > 11
Accessing plan assets Figure 20. If permitted by the plan, can borrow up to 5 of their balance (up to a maximum of $50,000) from their DC plan account. Plan loans allow DC to access their plan savings before retirement without incurring income taxes or tax penalties. Figure 21. Plan withdrawals allow to access their plan savings before a job change or retirement. Withdrawals are optional plan provisions, and availability varies from plan to plan. Plan withdrawals are used infrequently in the aggregate. Certain could, over time, jeopardize their retirement program if they continue to rely on this feature throughout their working careers. Figure 20. Participant loans, 2016 defined contribution plans offering loans <1,000 1,000+ Outstanding loans with outstanding loans 11% 9% 16% account balance in loans 1 1 11% Average loan balance 11,069 9,980 9,693 Number of outstanding loans per participant 0 loans 89% 91% 84% 1 loan 9 8 12 2 loans 2 1 3 3+ loans 0 0 1 Source:, 2017. Figure 21. Participant in-service withdrawals, 2016 defined contribution plans offering in-service withdrawals <1,000 1,000+ using 1.9% 2.4% 3.4% assets withdrawn 0.8 0.8 0.9 participant account assets withdrawn 39.5 29.8 32.3 Source:, 2017. 12 > firms
Methodology participation and deferral rates Data on participation and deferral rates is drawn from a subset of recordkeeping clients for whom we perform nondiscrimination testing. Selected plan design features are also derived from this data. For the 2016 analysis, the subset is composed of plans that complete their testing by March and represents approximately one-third of the clients for whom we perform testing. Plans that complete their testing by March generally have lower participation rates and generally include plans with concerns related to passing testing. When all plans have completed their testing by the end of 2017, the participation rates improve. Plan design features derived from this data also improve. Interestingly, the deferral rates do not change significantly. Based on the trends experienced over the prior three years, we have estimated participation rates for 2016. The estimations use a combination of linear extrapolation and subjective estimation. The same approach is applied to plan design features derived from this data. We will continue to restate these results in the following year based on the final compliance testing results. Industry-specific supplements Benchmark data supplements to How America Saves are available for the following sectors: Ambulatory health care services Architecture and engineering Finance and insurance Information Legal services Manufacturing Mining, oil, and gas extraction If the sector you are interested in is not available at this time, please contact your sales executive or relationship manager. Acknowledgments We extend our thanks to the following crew members who made this publication possible: Jeffrey W. Clark William G. Doughty John A. Lamancusa Daniel C. Proctor Jean A. Young firms > 13
Institutional Investor Group P.O. Box 2900 Valley Forge, PA 19482-2900 Connect with > institutional.vanguard.com > global.vanguard.com (non-u.s. investors) research > Center for Investor Research Investment Strategy Group All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. The Group has partnered with Financial Engines Advisors LLC to provide subadvisory services to the Managed Account Program and Personal Online Advisor. Financial Engines Advisors LLC is an independent, federally registered investment advisor that does not sell investments or receive commission for the investments it recommends. Advice is provided by Advisers, Inc. (VAI), a federally registered investment advisor and an affiliate of The Group, Inc. (). Eligibility restrictions may apply. Neither, Financial Engines, nor their respective affiliates guarantee future results. Financial Planning Services are provided by Advisers, Inc., a registered investment advisor. 2017 The Group, Inc. All rights reserved. HASTEC 062017